Hong Kong's finance chief, John Tsang, may lower economic growth forecast

PUBLISHED : Monday, 09 June, 2014, 11:41pm
UPDATED : Tuesday, 10 June, 2014, 12:46pm

Financial Secretary John Tsang Chun-wah has warned he may lower the government's forecast for Hong Kong's economic growth this year if instability in the economy and the external business environment persists.

He gave the warning at a meeting of the Legislative Council's financial affairs panel yesterday. The Census and Statistics Department announced last week that the value of retail sales in April dropped 9.8 per cent year on year to HK$38.8 billion, and 9.5 per cent in volume.

"The local economy and the external business environment are facing many unstable factors. It was not as optimistic as I forecast at the beginning of the year," Tsang said. "If the situation continues, I will consider lowering the economic growth forecast for this year when I announce the mid-year economic situation report in August."

His current forecast is for growth of 3 to 4 per cent.

Tsang said that since exports had not been performing well, domestic demand had become an important factor in supporting the city's economy. He pointed out that growth in the gross domestic product in the first quarter was 2.5 per cent year on year compared with 2.9 per cent in the fourth quarter of last year.

The finance chief also said that even though property prices had "cooled", Hongkongers still should not neglect the risk of the property bubble bursting.

Explaining the instability in the external environment, he pointed to a drop in retail sales in Japan in April after an increase in the consumption tax. The country's trade ministry said sales in April declined by 13.7 per cent from the previous month.

"There was also instability in Thailand. Its economic growth in the first quarter has shrunk. … If the instability in Southeast Asia continues, the economic atmosphere in the region can be affected," Tsang said.

A professor of economics at Chinese University, Terence Chong Tai-leung, believed GDP growth could be about 3 per cent this year. He was optimistic because the economies in the United States and Europe were recovering, which he said would help the city's exports.